Bloomberg News

Rupee Drops a Third Day on Speculation Refiners Bought Dollars

January 16, 2013

India’s rupee fell for a third day on speculation local refiners stepped up dollar purchases to pay for costlier crude imports.

Oil prices in New York have climbed 9 percent since the end of October, heading for a third monthly advance. Asia’s third- biggest economy imports more than 75 percent of its energy needs. India’s current-account deficit widened to a record $22 billion in the quarter ended Sept. 30, official data showed on Dec. 31. The currency’s decline was limited by speculation gains in the nation’s stocks will attract investors.

“The rupee weakened, weighed by dollar demand from oil firms,” foreign-exchange analysts at Marex Spectron Group Ltd. wrote in a report. “Gains in domestic shares helped sentiment for the rupee.”

The rupee fell 0.1 percent to 54.75 per dollar as of 9:50 a.m. in Mumbai, according to data compiled by Bloomberg. One- month implied volatility in the rupee, a gauge of expected moves in the exchange rate used to price options, rose five basis points to 9.80 percent.

The BSE India Sensitive Index (SENSEX) of shares rose through 20,000 this week for the first time since January 2011, and climbed 0.3 percent today on speculation the central bank and the government will boost efforts to spur the economy.

Offshore forwards indicate the rupee will trade at 55.75 to the dollar in three months, compared with expectations of 55.79 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net


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